KUALA LUMPUR (Nov 20): Shares of Dialog Group Bhd (KL:DIALOG) rose on Wednesday in active trading, as investors took comfort in the strong start to its earnings, while analysts continued to recommend their clients to buy into the energy services firm.
Dialog’s first quarter results met consensus expectations, setting the company on the path to make RM637 million in net profit for the full-year ending June 2025. Analysts are betting on recurring income growth from higher demand for its storage terminals, and that its margins would improve.
“Dialog's earnings are on an upward trajectory, driven by improved occupancy rates and spot rates at its independent tank terminals, due to the sustained increase in demand regionally for storage,” said Kenanga Investment Bank.
Dialog rose as much as 5% or nine sen to RM2.08. The stock was trading at RM2.00 at 10.15am, with close to 5.5 million shares exchanging hands — above the average of the past seven sessions. At its last price, the company had a market capitalisation of RM11 billion.
Shares of Dialog have slipped 1.5% so far this year, largely tracking peers in the energy sector and crude oil prices, amid easing concerns over output and weakening demand. Troubles at its construction segment plagued by cost escalation of legacy contracts, have also dragged on the stock.
A large majority of analysts are bullish on Dialog, with 11 “buy” calls out of 15 covering the stock, with the rest on “hold” rating. The consensus 12-month target price is RM2.78, according to Bloomberg, implying a potential return of 39% from its last price.
“Margins should continue to improve,” as new construction and maintenance contracts will “incorporate better rates,” said Maybank Investment Bank. Dialog needs to win “new, sizeable tank terminal contracts to further grow its recurring income, which will lead to a rerating,” it noted.
That may come from Singapore-based ChemOne’s development of Pengerang Energy Complex and Petronas’ RM6 billion development of a biorefinery with Eni and Euglena, which will require tank terminals for long-term storage of refined or crude products, the research house said.
On Tuesday (Nov 19), Dialog reported that net profit in its first quarter ended Sept 30, 2024 (1QFY2025) grew 14.2% year-on-year to RM150.97 million, as higher tank-storage occupancy and tariffs, coupled with higher share of profits from joint ventures and associates, offset overall decline in revenue.
Operating expenses fell 18% during the quarter, helping cushion close to a 19% drop in total revenue to RM634.45 million.